The U.S. Securities and Exchange Commission (SEC) has approved the first spot Ethereum (ETH) ETF. Acknowledging the popularity of the asset and the fact that the Spot Bitcoin ETF has been the fastest-growing ETF in ETF history, these ETFs could have a major impact across financial markets, according to BlackRock CEO Larry Fink.
JUST IN: 🇺🇸 SEC approves spot Ethereum ETF. pic.twitter.com/t7KLtcaMNg
— Bitcoin Magazine (@BitcoinMagazine) May 23, 2024
The newly approved Spot Ethereum ETF gives investors direct exposure to Ethereum, the second-largest cryptocurrency by market capitalization, without having to purchase and store the digital asset directly.
“Just to be clear, this doesn’t mean we’ll start trading tomorrow. This is just a 19b-4 approval. We also need approval for the S-1 document, so that will take time,” said Bloomberg ETF analyst James Seyffart. news. “We’re expecting it to take a few weeks, but it could take longer. We’ll know more in a week or so!”
The drastic change in the approval odds for these ETFs surprised everyone last Monday when Bloomberg analysts Eric Balchunas and James Seyffart increased the odds of approval from 25% to 75%. “We heard this afternoon that the SEC may do a 180-degree turn on this (an increasingly political issue) and now everyone is rushing (just as we all thought it would be rejected),” Balchunas explained.
There has been a long-standing debate as to whether Ethereum should be considered a security or a commodity. Critics of Ethereum argue that Ethereum has passed the Howey test and should therefore be classified as a security. Howey test consists of four criteria: investment of money, expectation of profit, joint enterprise, and dependence on the efforts of others. Here is a video from 2014 in which current SEC Chairman Gary Gensler explains why he believed ETH passed the Howey test at the time.
Kindly note that the current SEC Chairman believes that Ethereum has passed the Howey test. pic.twitter.com/qFKeBFdKCH
— Modern Stacker (@ModernStacker) January 20, 2023
And with recent regulatory developments, along with the approval of this ETF, it appears regulators are now moving towards regulating ETH as a commodity.
Yesterday, a bill developing a regulatory framework for digital assets (HR 4763 – Financial Innovation and Technology Act 21 (FIT 21)) passed the House of Representatives. Unlike other Bitcoin and cryptocurrency-related bills voted on in the House and Senate earlier this month, this bill received positive feedback from the White House, which initially said it did not like the bill as it stands but said it would work with Congress to find a solution. I said I wanted to. If not vetoed, it will go to President Biden’s desk to be signed into law.
“Two-thirds of the House voted in favor of cryptocurrency clarity,” Patrick McHenry, chairman of the Republican Committee on Financial Services, told CNBC today. “This creates a legal framework that gives the SEC an appropriate role, the CFTC an appropriate role, rather than the series of conflicting regulatory actions that the two agencies have taken over the past decade to determine what digital assets are, and the trading of those assets. and providing a legal framework for purchasing.”
#see: Chairman @Patrick McHenry signature @SquawkCNBC to discuss yesterday’s historic bipartisan vote on landmarks. #Fit21. He covers:
✌️ Key provisions
🔎 Make it clear @CFTC big @SECGov jurisdiction
🚂 Next steps for enactment📺 Don’t miss this conversation 👇 pic.twitter.com/F49JjPf5tH
— Financial Services GOP (@FinancialCmte) May 23, 2024
If FIT 21 passes the Senate and President Biden signs the bill, ETH could be classified as a commodity under these new guidelines, but the official outcome of that decision has not yet been revealed.
Congress is currently “building a cryptocurrency constituency,” according to U.S. Senator Cynthia Lummis, who shared her support for the House passing FIT 21 yesterday.